Tariffs, Trade, and New Horizons: What UK Businesses Need to Know in 2025

The re-election of Donald Trump has marked a dramatic return to protectionist trade policy in the United States. As of April 2025, a sweeping new tariff regime has come into force, with major implications for UK exporters. With many businesses still uncertain about whether the new US tariffs are additional or replacing existing ones—and how goods made outside the UK are affected—this article breaks down the facts and outlines practical steps for UK businesses to adapt.​

Starting 5 April 2025, the US imposed a baseline 10% tariff on nearly all imported goods, including those from the UK. These new duties are generally in addition to existing tariffs. However, certain sectors—such as steel and aluminium—are governed by separate, pre-existing tariff measures. For instance, UK steel and aluminium exports have faced a 25% tariff since 12 March 2025, and as a result, they are excluded from the new 10% blanket tariff. This means they continue to be taxed at 25%, rather than 35%.

This blanket approach is part of a wider strategy aimed at correcting trade imbalances, with additional tariffs targeting specific countries with large trade surpluses with the US. While the UK’s trade balance with the US is relatively even, the 10% charge still applies across most sectors.​

It’s Not Just Where You Export From…

A key detail often missed is that tariffs are applied based on the origin of the goods, not simply the location from which they are exported. Many UK businesses sell goods that are made in countries like China or India, repackaged or distributed via the UK. But under US customs rules, unless the goods undergo substantial transformation in the UK, they will still be classified according to their original country of manufacture.​

This has major consequences. Goods of Chinese origin, for example, are now subject to tariffs as high as 145%, while Indian-origin goods could also face higher rates depending on the product category. Simply shipping these through the UK does not reduce the tariff burden.​

For UK exporters, understanding the rules of origin has never been more important. Failing to do so can result in unexpected costs, delays, or even non-compliance penalties at the US border.​

Which Sectors Are Hit Hardest?

• Automotive and Machinery: UK-made cars now face a 25% tariff in the US, making them significantly less competitive.

• Steel and Aluminium: These materials have been hit with 25% tariffs, affecting manufacturers reliant on metal exports.

• Consumer Goods and E-commerce: Food, clothing, and electronics that include parts from China or India face additional scrutiny and higher rates.​

Smaller businesses, especially those shipping goods under the now-removed $800 de-minimis threshold for Chinese goods, are likely to face higher compliance costs and new documentation requirements.​

A New Opportunity: The UK–India Free Trade Agreement

Amid this turbulent backdrop, the UK has been pursuing other trade ties to give its businesses an edge. On 6 May 2025, Britain and India finalised a landmark UK–India Free Trade Agreement (FTA) after three years of intermittent negotiations.

This deal is poised to slash many tariffs between the UK and India. India has agreed to cut or eliminate duties on 90% of product lines over time (85% becoming fully tariff-free within a decade). That includes some steep reductions: tariffs on British whisky and gin will be halved from the eye-watering 150% rate down to 75% immediately, then further to 40% over ten years, and automotive tariffs (previously over 100% in India) will drop to 10% for a quota of UK-made vehicles.

In practical terms, UK firms can diversify away from China-centric supply chains by tapping India (now a partner with preferential terms) without as much cost penalty. And importantly, Indian-origin goods are not subject to the kind of punitive U.S. tariffs levied on Chinese goods. Sourcing from India may help UK companies reduce exposure to U.S. trade penalties – at worst, Indian goods face the same 10% U.S. tariff as UK goods do, not the triple-digit rates aimed at China.​

What Can UK Businesses Do Now?

• Audit your supply chain: Know where your products (and their components) are actually made. This is the single biggest factor in how tariffs apply.

• Explore re-sourcing options: Consider suppliers in countries like India, Vietnam, or Eastern Europe, which are less exposed to punitive US tariffs.

• Recalculate landed costs: Include US tariffs in your pricing models and renegotiate terms with buyers if needed.

• Engage with policy: The UK government is gathering feedback on potential retaliation. Respond if your business may be affected.

• Monitor July negotiations: Some higher reciprocal tariffs have been paused for 90 days until 8 July 2025. Outcomes from these talks could further impact trade flows.​

Final Word: Be Proactive, Not Reactive

These tariffs are already changing global trade patterns. Some UK firms—like JCB—are moving production to the US to sidestep the charges entirely. Others are diversifying to reduce dependence on the American market.​

But for most, this is a time to act strategically, not reactively. Understand your risk exposure, rethink your sourcing, and explore new market opportunities. The tariffs are additional, complex, and unlikely to disappear soon—but with the right steps, UK businesses can weather the storm and even find new paths to growth.​